<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended March 31, 1996 Commission file number 01-18695
WORK RECOVERY, INC.
(Exact name of registrant as specified in its charter)
Colorado 68-0165800
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2341 South Friebus Avenue, Suite 14, Tucson, AZ. 85713
(Address of principal executive offices) (Zip Code)
(520)-322-6634
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 12, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes____No____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of March 31, 1996 there
were 45,918,623 shares of common stock outstanding, which is Registrant's sole
class of common outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WORK RECOVERY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
(Unaudited)
March 31, June 30,
1996 1995
------------ ------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 253,000 $ 6,554,000
Accounts Receivable, net 245,000 1,493,000
Inventories, net 1,089,000 356,000
Marketable Securities 16,000 66,000
Prepaid Expenses and Other Assets 1,008,000 333,000
----------- ----------
Total Current Assets 2,611,000 8,802,000
Property, Plant & Equipment, net 5,227,000 5,649,000
Intangible Assets, net 176,000 465,000
Other Assets 449,000 743,000
----------- ----------
Total Assets $ 8,463,000 $ 15,659,000
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable $ 1,776,000 $ 1,168,000
Accrued Expenses 558,000 345,000
Notes Payable 754,000 3,676,000
Current Portion of Long-Term Debt 469,000 441,000
Other Current Liabilities 45,000 88,000
Unallocated Credits 2,514,000 966,000
Deferred Consulting Revenue 2,009,000 2,009,000
---------- ----------
Total Current Liabilities 8,125,000 8,693,000
Long-Term Debt 2,324,000 2,255,000
---------- ----------
Total Liabilities 10,449,000 10,948,000
Commitments and Contingent Liabilities
Shareholders' Equity (Deficit):
Preferred Stock, Cumulative Convertible 1,425,000 1,685,000
Common Stock, $.004 par value:
Authorized 100,000,000 shares, issued and
outstanding 45,918,623 shares at March
31,1996 and 44,132,172 shares at June
30,1995 184,000 176,000
Additional Paid-in Capital 57,265,000 53,648,000
Accumulated Deficit (60,860,000) (49,414,000)
Treasury Stock, at Cost (1,384,000)
---------- ----------
Total Shareholders' Equity (Deficit) (1,986,000) 4,711,000
---------- ----------
Total Liabilities and Shareholders'
Equity (Deficit) $ 8,463,000 $ 15,659,000
========== ==========
</TABLE>
See Notes to Consolidated Financial Information
<PAGE> 3
WORK RECOVERY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March, 31
-------------------------- ----------------------------
Restated Restated
1996 1995 1996 1995
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net Revenues $ 1,548,000 $ 4,806,000 $ 4,608,000 $ 12,029,000
Cost of Sales 2,054,000 2,621,000 7,170,000 7,495,000
---------- ---------- ---------- ----------
Gross Profit (Loss) (506,000) 2,185,000 (2,562,000) 4,534,000
Expenses:
Selling, General and
Administrative 1,535,000 2,721,000 5,862,000 5,659,000
Settlement with Investors 185,000
Loss from Unusual
Transactions and Activities 128,000
Additional Bad Debts 240,000 1,014,000 3,203,000
Impairment Losses 707,000 707,000 10,000,000
---------- ---------- ---------- ----------
Loss From Operations (2,748,000) (776,000) (10,458,000) (14,328,000)
---------- ---------- ---------- ----------
Other Income (Expense):
Interest Income 3,000 160,000 266,000 257,000
Interest Expense (73,000) (86,000) (250,000) (243,000)
Investment Loss (3,521,000) (922,000) (7,558,000)
Miscellaneous Expense (14,000) (80,000) (187,000)
---------- ---------- ----------- ----------
Net Other Expense (84,000) (3,527,000) (906,000) (7,731,000)
---------- ---------- ----------- ----------
Loss Before Income
Taxes Benefits (2,832,000) (4,303,000) (11,364,000) (22,059,000)
Income Taxes (Benefits) (332,000)
---------- ---------- ----------- ----------
Net Loss $(2,832,000) $(4,303,000) $(11,364,000) $(21,727,000)
========== ========== =========== ==========
Loss Per Common and Common
Equivalent Share $ (.06) $ (.12) $ (.25) $ (.70)
Weighted average Number of
Common Shares Outstanding 45,918,623 34,573,560 45,770,756 30,850,772
</TABLE>
See Notes to Consolidated Financial Information
<PAGE> 4
WORK RECOVERY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------------
1996 1995
------------ -----------
<S> <C> <C>
Net Cash Used in
Operating Activities $(5,909,000) $(3,746,000)
Cash Flows from Investing Activities:
Investment in Notes Receivable (1,535,000)
Investment in Deposits and Other Assets 59,000
Purchases/Sales of Property, Plant and
Equipment In-Service, net (428,000) (178,000)
Investment in Unconsolidated Affiliates (567,000) (349,000)
Loans to Officers and Former Officers (384,000)
Sale of Clinical Centers 100,000
---------- ----------
Net Cash Used in Investing Activities (1,279,000) (2,003,000)
---------- ---------
Cash Flows from Financing Activities:
Proceeds from Issuance of Stock 924,000 6,135,000
Net Repayments on Short-Term Debt (162,000) (15,000)
Proceeds from Notes Payable 325,000
Proceeds from Issuance of Long-Term
Debt 425,000 46,000
Repayment of Long-Term Debt (625,000) (294,000)
---------- ---------
Net Cash Provided by
Financing Activities 887,000 5,872,000
---------- ---------
Net Increase (Decrease) in Cash (6,301,000) 123,000
Cash at Beginning of Period 6,554,000 1,188,000
--------- ---------
Cash at End of Period $ 253,000 $ 1,311,000
========== =========
</TABLE>
See Notes to Consolidated Financial Information
<PAGE> 5
WORK RECOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
1. Chapter 11 Bankruptcy Filings and Reorganization
DURING THE FISCAL YEAR ENDED JUNE 30, 1996, THE ENTIRE MEMBERSHIP OF THE BOARD
OF DIRECTORS OF WORK RECOVERY, INC. (the "COMPANY") WAS REPLACED AND
SIGNIFICANT CHANGES IN THE COMPANY'S MANAGEMENT OCCURRED.
ON MAY 29, 1996, THE COMPANY AND ITS WHOLLY-OWNED SUBSIDIARY WORK RECOVERY
CENTERS, INC. FILED VOLUNTARY PETITIONS FOR REORGANIZATION UNDER CHAPTER 11
OF THE UNITED STATES BANKRUPTCY CODE IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ARIZONA AND IS CURRENTLY OPERATING AS DEBTOR-IN-
POSSESSION SUBJECT TO THE LIMITATIONS AND REQUIREMENTS OF THE BANKRUPTCY CODE.
ON NOVEMBER 25, 1996 THE BANKRUPTCY COURT CONFIRMED THE COMPANY'S PLAN OF
REORGANIZATION.
THE ACCOMPANYING FINANCIAL STATEMENTS FOR THE PERIODS IN THE FISCAL YEAR ENDED
JUNE 30, 1995 HAVE BEEN RESTATED TO REFLECT CERTAIN ADJUSTMENTS RECORDED TO THE
FINANCIAL STATEMENTS IN FORM 10-K FOR THE YEAR ENDED JUNE 30, 1995. DUE TO THE
SIGNIFICANT CHANGES IN THE MANAGEMENT OF THE COMPANY, CURRENT MANAGEMENT IS
UNABLE TO PROVIDE AN ACCURATE OR COMPLETE DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE PERIODS COVERED BY THIS REPORT.
THIS REPORT SHOULD BE READ IN CONJUNCTION FORM 10-K FOR THE YEARS ENDED JUNE 30,
1995, 1996 AND SUBSEQUENT FILINGS.
2. Basis of Presentation
The accompanying unaudited consolidated financial information has been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article l0 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included.
All inter-entity accounts and transactions have been eliminated in the
consolidated financial statements.
<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
DUE TO THE SIGNIFICANT CHANGES IN THE MANAGEMENT OF THE COMPANY, CURRENT
MANAGEMENT IS UNABLE TO PROVIDE AN ACCURATE OR COMPLETE DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE PERIODS
COVERED BY THIS REPORT. THIS REPORT SHOULD BE READ IN CONJUNCTION WITH FORM
10-K FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND SUBSEQUENT FILINGS AND
ACCOMPANYING FINANCIAL STATEMENTS AND NOTES THERETO.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Due to the significant changes in the management of the Company, current
management is unable to provide an accurate or complete discussion of legal
proceedings for the period covered by this report. This report should be
read in conjunction with Form 10-K for the years ended June 30, 1995, 1996
and subsequent filings which discuss the Company's Chapter 11 bankruptcy
proceedings and developments in connection therewith and other matters
pertaining to the period by this Form 10-Q.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
A Report on Form 8-K, dated January 5, 1996 was filed by the
Registrant which reported under Item 5 the contemplated change in
control of the Board of Directors and Management of the Company.
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WORK RECOVERY, INC.
(Registrant)
/s/ DORCAS R. HARDY
Dorcas R. Hardy, Acting Chief Executive Officer (Principal Executive Officer)
Date: January 15, 1997
/s/ ROBERT D. JUDSON, JR.
Robert D. Judson, Jr., Acting Chief Financial officer (Principal Financial and
Accounting Officer)
Date: January 15, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 253,000
<SECURITIES> 16,000
<RECEIVABLES> 3,503,000
<ALLOWANCES> 3,258,000
<INVENTORY> 1,089,000
<CURRENT-ASSETS> 2,611,000
<PP&E> 9,094,000
<DEPRECIATION> 3,867,000
<TOTAL-ASSETS> 8,463,000
<CURRENT-LIABILITIES> 8,125,000
<BONDS> 0
0
1,425,000
<COMMON> 184,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,463,000
<SALES> 616,000
<TOTAL-REVENUES> 4,608,000
<CGS> 308,000
<TOTAL-COSTS> 7,170,000
<OTHER-EXPENSES> 7,538,000
<LOSS-PROVISION> 1,014,000
<INTEREST-EXPENSE> 250,000
<INCOME-PRETAX> (11,364,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,364,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,364,000)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
